Stalled Oak Knoll development leaves fire fears

DEVELOPMENT

Carolyn Jones, Chronicle Staff Writer

Published
4:00 am PDT, Thursday, October 22, 2009

Don Mitchell visits decaying housing facilites on the site of the former Oak Knoll Naval Hospital in Oakland, Calif., on Thursday, Oct. 15, 2009. Mithcell is among a group of neighbors have filed suit against Lehman Brothers, which went bankrupt, and has let the property fall into disrepair. less

Don Mitchell visits decaying housing facilites on the site of the former Oak Knoll Naval Hospital in Oakland, Calif., on Thursday, Oct. 15, 2009. Mithcell is among a group of neighbors have filed suit against ... more

Photo: Paul Chinn, The Chronicle

Photo: Paul Chinn, The Chronicle

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Don Mitchell visits decaying housing facilites on the site of the former Oak Knoll Naval Hospital in Oakland, Calif., on Thursday, Oct. 15, 2009. Mithcell is among a group of neighbors have filed suit against Lehman Brothers, which went bankrupt, and has let the property fall into disrepair. less

Don Mitchell visits decaying housing facilites on the site of the former Oak Knoll Naval Hospital in Oakland, Calif., on Thursday, Oct. 15, 2009. Mithcell is among a group of neighbors have filed suit against ... more

Photo: Paul Chinn, The Chronicle

Stalled Oak Knoll development leaves fire fears

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Oak Knoll, once a leading hospital for casualties of the Korean and Vietnam wars, now resembles a war zone itself.

The former Navy base in the Oakland hills has devolved into a swath of collapsed buildings, crumbling roads, mounds of toxic waste, shattered glass and bullet casings since Lehman Bros. - the financial firm backing a development at the site - filed for bankruptcy in 2008.

"It's one of the most incredible pieces of property in the East Bay," said Oakland City Councilman Larry Reid. "But right now it's tremendously unsafe. Lehman leaves, and we get slapped in the face."

The city and neighbors are fighting back, filing claims in bankruptcy court demanding funds to clean up the 167-acre site, which the city calls an extreme fire hazard. The neighbors are asking for $115 million to cover cleanup and damages, and the city wants $6.7 million to remove hazardous materials and demolish the 90 buildings on the site.

The city got some good news on Friday, when SunCal, the project developer, announced it had received $500,000 from Lehman's bankruptcy trustee to cut weeds, clean up debris, repair fences and hire 24-hour security guards.

"It pisses me off," he said. "Lehman spent all this money on this property, and when it wasn't convenient anymore they packed up and left, leaving us with an extreme fire hazard."

A bankruptcy judge is expected to rule in the next few weeks on the city's and neighbors' claims.

Oak Knoll hospital was built on a former golf course during World War II to treat military personnel wounded in the Pacific. Over the years, thousands of casualties from the Korean and Vietnam wars were treated there, as well as veterans and civilians. The hospital became a leader in prosthetics, plasma production, tissue grafts, nerve research and other fields related to battle injuries.

When the hospital was decommissioned in 1996, Capt. David Snyder, the base's final commander, told Oakland, "Remember that God smiles on (this land) because it has been consecrated for all time by the dedication and sweat, and in many cases the tears and the very life's blood, of ... men and women at arms who have served here, suffered here, lived here and sometimes died here."

In 2005, Lehman and SunCal bought the site for $100 million and planned to build 960 homes, a shopping area and a 50-acre park. With easy freeway access and views of the bay and hills, the new neighborhood promised to be a boon for Oakland.

Last year, SunCal began demolition. Then Lehman collapsed.

Days after the financial giant filed for Chapter 11, SunCal stopped work at Oak Knoll, leaving piles of debris and half-demolished buildings. Squatters moved into the old hospital, looters stripped the copper wiring, and weeds have overtaken the roads.

Meanwhile, SunCal has found another financial backer, D.E. Shaw, and is waiting for the bankruptcy judge to allow the project to proceed. SunCal and Lehman partnered on 18 developments in California, and SunCal is entangled in its own litigation with Lehman, said SunCal spokesman Joe Aguirre.

"Our goal is to resume work at Oak Knoll," he said. "We want to finish this project."